VDA Phase Out Management of Electronic Components in the Automotive Aftermarket 605 With this proposal a process will be described, in order to a) give the OEM and the Tier 1 a better opportunity to react to forecasted potential phase out of components or plant closings and to b) give the component manufacturer through demand forecasting a better opportunity for phase out planning. This recommendation is the result of project work completed by the VDA workgroup Phase Out Management of Electronic Components in cooperation with the ZVEI - Zentralverband Elektrotechnik- und Elektronikindustrie e.v. English Translation of Version 1.0 of March 2012 Publisher : Verband der Automobilindustrie Copyright Behrenstraße 35 Reprinting and every other Form 10117 Berlin of duplication is authorized with Telefon 030/897842-0 clear statement of the source. Telefax 030/897842-0 Internet: www.vda.de
VDA Recommendation 605 English Translation of Version 1.0, March 2012 Page 2 of 9 Disclaimer VDA recommendations are freely available for general use. The user is responsible for ensuring correct application in each specific case. They consider the latest technology available at the time of issue. Application of VDA recommendations does not relieve the user from responsibility for his own actions. In this regard, all users act at their own risk. Any liability of the VDA and those involved in VDA recommendations is excluded. Anyone applying VDA recommendations who identifies inaccuracies or possible incorrect interpretations is requested to inform VDA immediately so that any errors can thus be rectified.
VDA Recommendation 605 English Translation of Version 1.0, March 2012 Page 3 of 9 Table of Content 1 Introduction... 4 1.1 Current Situation... 4 1.2 Goals of the Recommendation... 4 1.3 Structure of the Recommendation and Limitation of the Content... 4 2 Process: Demand and Availability Forecast (DAF)... 5 2.1 Basic Idea... 5 2.2 Process Advantages... 5 2.3 Basic Parameters for the Exchange of Data... 5 2.4 Operational Implementation... 6 3 Summary... 8 4 Abbreviations, additional details... 9
VDA Recommendation 605 English Translation of Version 1.0, March 2012 Page 4 of 9 1 Introduction 1.1 Current Situation The product lifetimes of the semiconductor industry and the supply obligations of the automobile industry progress over different timeframes. In addition to considerations of the automobile industry, for example assurance of backwards compatibility, redesign, remanufacturing, etc. it is therefore essential, already at the time of approval for series production, to consider the interests of the aftermarket (ref. in this regard VDA- Recommendation 604). With this recommendation a process for the provision of information along the supply chain will be presented which makes it possible to react early to emerging component end-of-life announcements, the ramp down of production lines, or plant closings. Prerequisite therefore is a forward-looking demand estimation by the OEM, respectively the Tier 1, to the component manufacturer, in order to allow for the best possible planning and therefore for the best possible post-series supply. 1.2 Goals of the Recommendation Product terminations by the component manufacturer into the supply chain from Tier n through to the OEM are often too short-term to allow for an appropriate reaction. The goal of the recommendation is the description of a process for the provision of information along the complete supply chain in order to lengthen the timeframe with an announcement (prognosis of the termination timeframe). Thus on the one hand the reaction time and possibilities of the automobile industry, and on the other hand the planning possibilities of the component manufacturer can be significantly improved. 1.3 Structure of the Recommendation and Limitation of the Content In chapter 1 general information with regard to the recommendation can be found. Chapter 2 contains a description of a process for the lengthening of the reaction time for an impending component termination. Demand and Availability Forecast (DAF). In the following the fundamental idea as well as the process advantages will first be explained. Subsequently the basic parameters will be defined and the operative realization of the Demand and Availability Forecast described. Additionally, schematic overviews of the process flows will be presented. In chapter 3 the significant contents of the recommendation will in conclusion be summarized. Abbreviations as well as additional details can be found in chapter 4. The definition of the automotive industry used in this recommendation encompasses both the supplier (Tier n ) and also the vehicle manufacturer (OEM). The contact partner of the component manufacturer is always considered as the customer, with whom he has a contractual relationship, i.e. as a rule the Tier n.
VDA Recommendation 605 English Translation of Version 1.0, March 2012 Page 5 of 9 2 Process: Demand and Availability Forecast (DAF) 2.1 Basic Idea To master the spare part supply duration for electronic components (eg. ECUs, intelligent sensors) under continuously increasing diversity of electronic applications in the automobile, the often relatively short time period between a product termination and the corresponding order deadline or delivery deadline should be extended to include an announcement (prognosis of the termination timeframe). In this regard the existing communication structures between the automotive industry and the component manufacturer should be improved and standardized. Through the earliest possible announcement of demand along the complete supply chain, as well as the early communication of possible termination dates by the semiconductor industry, the planning reliability at each step in the supply chain shall be increased and consequently all participants shall be given the opportunity to react quickly to impending changes. For this purpose a so-called Demand and Availability Forecast (DAF) will be added in front of the existing termination process, as a rule managed according to the JEDEC standard JESD48B. The prognosis contains relevant information which is exchanged between the component manufacturer and the customer (Tier n ). 2.2 Process Advantages Through the regular exchange of demand planning over a largest possible forecast time period the following advantages can be realized over the complete supply chain: Improved transparency increases planning possibilities & dependability Early identification of possible product terminations opens realistic time periods for the evaluation and identification of alternatives Cost reduction for example through: - Reduction in effort for operative coordination - Avoidance of escalation cases - Reduction of stockholding 2.3 Basic Parameters for the Exchange of Data The following basic parameters should be ensured for successful use: A time interval is to be agreed upon between the customer and the supplier during which the data about demand volumes will be exchanged. A time frame of 36 months for demand planning is proposed. Additionally a cross-check of active part numbers is to be completed. A yearly cycle for data exchange in coordination between the customer and supplier is recommended. It is to be agreed bilaterally who will initiate the process (customer or supplier) by identifying the data in his system(s) to make it available for the other party.
VDA Recommendation 605 English Translation of Version 1.0, March 2012 Page 6 of 9 2.4 Operational Implementation As the criticality with regard to potential alternative components is dependent upon the type of component, a classification in commodities 1, ASSP 2, microcontroller and CSP 3 has been carried out. For so-called commodities the identification of alternatives is considered relatively unproblematic, therefore these will not be further considered in this recommendation. In the event that this category of component must be managed, it can be handled in the same manner as the procedure for ASSP and CSP. Within the scope of the DAF the demand for ASSP, microcontroller, and CSP over the following 12 months should be estimated as accurately as possible, and for an additional 24 months a non-binding volume estimation of demand (OE and aftermarket) should be completed. These figures should be reported to the component manufacturer. In this manner, the report encompasses in total 36 months and should occur annually. In return the automobile industry receives also for the same forecast period a corresponding prognosis of product termination intentions for ASSP, microcontroller, and CSP from the component manufacturer. This includes a best possible concrete plan for the next 12 months as well as a forecast for an additional 24 months as an indication, in total therefore 36 months. The information exchanged in the course of the DAF should contain the following data: - Anticipated demand volumes (Automobile Industry) - Cross-check of active part numbers - Anticipated termination dates (Component Manufacturer) - Termination reasons (Component Manufacturer) - Alternatives (Component Manufacturer) Based upon this information a cooperative definition of measures along the supply chain should occur to address possible bottlenecks. 1 Commodities = Standard components, for example Diode, Resistor, Capacitor 2 ASSP = Application Specific Standard Product, for example Transceiver 3 CSP = Customer Specific Product, for example ASIC, ROM
VDA Recommendation 605 English Translation of Version 1.0, March 2012 Page 7 of 9 Illustration 1 shows the chronological course of events of DAF and Product Termination Note (PTN), with which an improved potential to react in the event of emerging product terminations or plant closings can be achieved. ill. 1 Process Depiction Illustration 2 shows the information to be exchanged along the supply chain. The component manufacturers contact is always his customer (TIER n ) in the automotive industry with whom he has a contractual relationship. Within the automobile industry information is passed along from TIER n through TIER 1 until it reaches the OEM, in each case in both directions. OEM DAF over 36 month and split up per component TIER 1) 1 Prognosis of Amount - Estimation for the next 12 month Information contains: - Forecast for additional 24 month - Termination reasons - Based on part number (component) - Alternative component - Report of OEM towards TIER 1 on basis of final product TIER n - Anticipated termination date Active part numbers - Probability of occurrence Component manufacturer 1) TIER 1 identifies the affected part numbers of the OEM (all ASSP, Microcontroller, CSP) ill. 2 Type of information to be exchanged along the supply chain
VDA Recommendation 605 English Translation of Version 1.0, March 2012 Page 8 of 9 3 Summary In this recommendation the process for an improved ability to react in the automotive aftermarket with regard to impending product terminations or plant closings has been depicted. At the same time the definition of the relevant informational time periods as well as the limitation of the relevant data and components are in focus. In order to realize the process potentials that have been pointed out, a regular and continuous flow of information between the component manufacturer and the TIER n through to the OEM is required in both directions.
VDA Recommendation 605 English Translation of Version 1.0, March 2012 Page 9 of 9 4 Abbreviations, additional details ASSP Application Specific Standard Product, for example Transceiver Commodity Standard component, for example Diode, Resistor, Capacitor CSP Customer Specific Product, for example. ASIC, ROM, Microcontroller DAF Demand and Availability Forecast JEDEC JEDEC Solid State Technology Association, USA LDD Last Delivery Date LOD Last Order Date OEM Original Equipment Manufacturer, here: Vehicle Manufacturer PTN Product Termination Note SOP Start of Production TIER Supplier to the vehicle manufacturer VDA Verband der Automobilindustrie e.v. ZVEI Zentralverband Elektrotechnik- und Elektronikindustrie e.v.